Closing Journal Entries Flashcards
1
Q
What is a closing entry?
A
Every time a company closes their fiscal year, temporary accounts reset to 0 (revenue, expenses, dividends)
2
Q
What does RED ALE stand for?
A
Revenue, Expenses, Dividends
Assets, Liabilities, Equity
3
Q
What does RED in RED ALE represent?
A
Temporary accounts that must be reset at the end of the fiscal year
4
Q
What does ALE stand for in RED ALE?
A
Permanent accounts, accounts that mustn’t be reset at the end of a company’s fiscal year
5
Q
How do closing entries work?
A
Zero expenses and revenue
Zero dividends by crediting dividends by as much as debiting retained earnings
6
Q
What is retained earnings classed as?
A
The balancing account
7
Q
Do closing entries demonstrate retained earnings on the SOCE?
A
Yes
